Medical Loss Ratio Waiver Requests Rejected for Indiana, Louisiana

While some entities want the medical loss ratio requirements to be completely abolished, some states are applying for exemption waivers from the requirements. The Department of Health and Human Services (HHS) denied requests from the states of Indiana and Louisiana to be exempt from the health care reform law’s medical loss ratio requirement. At issue is a provision of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) that compels health insurers to spend a minimum of 80% of premiums on patient care, as opposed to overhead costs such as administrative expenses, salaries and profit. In the event that an insurer does not meet the requirement, it must provide a rebate to its members, beginning in January 2012. The law permits HHS to issue a temporary waiver if the 80% ratio is likely to destabilize the individual health insurance market in the state.

Indiana had requested a 65% ratio for 2011, which would increase gradually over the next few years, as well as a permanent waiver for consumer-driven high deductible plans, which are gaining popularity in the state. HHS concluded that the state’s health plans were already meeting the 80% requirement or were capable of satisfying the requirement without becoming unprofitable, and that the agency was not given the authority to grant permanent waivers as was requested for the consumer-driven plans in the small group and individual markets.

Likewise, Louisiana requested an incremental increase over the the next two years, from 70% to 75%. HHS found the state based the request on preliminary data that the average medical loss ratio was 67%; however, the state’s most dominant insurer was not included in that figure, which would equal 79% if that insurer had been factored in the data.

“Neither application demonstrated an immediate need for an adjustment to the MLR standard,” stated Gary Cohen, acting director for the Office of Oversight at the HHS Center for Consumer Information and Insurance Oversight.

Thus far, 17 states have submitted waiver requests for the medical loss ratio requirement, of which seven have been approved and four have been denied.

Do you think the medical loss ratio requirement will provide a better value for health care consumers or will it destabilize the individual health insurance market, leaving fewer options for consumers?